Smart Manufacturing Key to American Innovation

After stunning sales in the last quarter, Apple just became the most valuable publicly-traded company in the world, with a market value of $419 billion -- proving yet again that American ingenuity and technological know-how remain unsurpassed in the global economy.

So why were almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year manufactured overseas?

The conventional wisdom would say that manufacturing jobs are leaving the United States to chase cheap labor, and that America will never again be able to compete with China or other nations where workers are willing to work 12 hours a day, six days a week, for just $1 or $2 an hour. This grim future of American manufacturing was summed up memorably by the straight-talking (fictional) presidential candidate Jack Stanton in the movie Primary Colors: "We now live in a world without economic borders. Push a button in New York and a billion dollars moves to Tokyo. In that world, muscle jobs go where muscle labor is cheap, and that is not here."

There's just one problem with the conventional wisdom: It's wrong. It reflects old-fashioned notions of assembly-line manufacturing that rely on human labor to insert tab A into slot B, thousands of times per shift. But while repetitive, unskilled, mind-numbing human labor may have powered the manufacturing economy of the last century, today's factories replace unskilled labor with high-tech automation that can provide spotless precision 24 hours a day, seven days a week.

So if low-cost human labor is not the deciding factor, why is America's manufacturing sector leaving our shores -- and more important, what can we do to bring it back home?

These are tough questions, with complicated, multiple-choice answers. But one thing is clear: Other countries are producing huge numbers of highly skilled, well-educated workers to oversee high-tech manufacturing, and America is falling behind.

As the Council on Competitiveness noted in its recent report, Make: An American Manufacturing Movement, "American manufacturers lack people with the necessary education and know-how to fill thousands of jobs, including skilled laborers, technicians, scientists and engineers."

The recent article in the New York Times on Apple's decision to outsource production summed up the problem in a single anecdote: When the iPhone was first going into production, "Apple's executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company's analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

"In China, it took 15 days."

Something is very wrong when good jobs go overseas because American corporations can't find enough qualified Americans to fill them here.

Let me stress: This problem has nothing to do with the ability or intelligence of American workers. We simply haven't been providing the training those workers need to fill those spots -- and we haven't been working in partnership with U.S. companies to make sure those jobs will be here when those workers complete their diplomas or training certificates.

We have to solve this problem, and we have to do it fast. Partly, we need to make sure that Americans who want to work have the skills they need to fill the available jobs. That means investing in community colleges and training programs that are tightly aligned with the current and anticipated needs of our high-tech companies.

But even more important, we need to "reshore" American manufacturing to create the kinds of productive innovation ecosystems that are powering our overseas competitors. U.S. companies cannot expect to prosper with an "Invent it here, make it there" business model. We need to invest in new hubs of industrial innovation that will bring together researchers, inventors, investors, manufacturers -- and factory workers.

When designers and engineers at high-tech companies share a roof, a campus or a zip code with their factory foremen, it creates opportunities to discuss ideas, test theories and solve problems. Ultimately, those ideas flowing back and forth between the R&D department and the factory floor result in better consumer products, increased sales, and higher profits.

As the fictional Jack Stanton noted, to compete successfully in the new global economy, "You have to exercise a different muscle -- the one between your ears." That's true for American workers, and it's true for American companies. We can never hope to be the world's cheapest labor force. Our only hope is to become the world's smartest -- and that, I believe, we can do.